NCPA - National Center for Policy Analysis


November 17, 2006

Low-tax and low-spending states enjoyed sizable decreases in poverty rates during the 1990s, while high-tax and high-spending states actually suffered increases in their levels of poverty, says Matthew Ladner of the Goldwater Institute.

According to his analysis of poverty rates from 1990-2000, Ladner found:

  • The 10 states with the highest state spending per capita (Alaska, California, Delaware, Hawaii, Massachusetts, New Mexico, New York, Rhode Island, Vermont and Wyoming) saw an average increase of 7.3 percent of overall poverty rates and a 4.5 percent increase in childhood poverty.
  • The 10 states with the lowest spending (Arizona, Colorado, Florida, Georgia, Missouri, Nebraska, Nevada, South Dakota, Tennessee and Texas) saw overall poverty decline by 11.2 percent and childhood poverty fall 12.2 percent.
  • The two most populous states, California and Texas, could not have differed more; California's overall poverty rate increased 13.6 percent and childhood poverty rose 10 percent, while Texas' overall poverty rate declined 14.9 percent and its childhood poverty rate decreased by 17.3 percent. 
  • Overall, according to the 2004 definition of red and blue states, red states saw an average decline of 11.7 percent in poverty rates, while blue states saw an average increase of 2.7 percent.

The dramatic declines in poverty in the "small government" states strongly confirms the hypothesis that reduced taxes and state spending encourages the emigration of people and businesses to areas where private-sector job growth is able to flourish and become a powerful and effective antipoverty program, says Ladner.  And while taxes and business climate alone are not the only factors in reducing poverty rates, they certainly go a long way in helping fight the war on poverty.   

Source: Matthew Ladner, "How to Win the War on Poverty: An Analysis of State Poverty Trends," Goldwater Institute, November 14, 2006.


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